KUALA LUMPUR (Apr 14): AllianceDBS Research Sdn Bhd is maintaining its "hold" call on RHB Capital Bhd shares with an unchanged target price of RM8.20.

This followed RHB Capital's announcement yesterday on a proposed internal reorganisation that would see RHB Bank Bhd take over RHB Capital's listing status. RHB Capital had also proposed a rights issue of new shares to raise up to RM2.5 billion.

Today, AllianceDBS said in a note the research firm was keeping its recommendation for RHB Capital pending new financial targets, which were due for announcement by end of June this year.

AllianceDBS said while RHB Capital's corporate exercise was positive for the group, the research firm was also mindful that the Malaysian banking sector remained challenging in 2015 with moderate loan growth.

AllianceDBS also expects the banking sector's net interest margin to be pressured by higher funding cost as capital market slows. The research firm also cited higher credit costs and operating costs due to the goods and services tax as challenges affecting the banking sector.

"Pricing of the rights will be determined later but the management has hinted at a 20%–30% discount to RHBC’s (RHB Capital) share price. We estimate the entire corporate exercise would dilute EPS by c.10% but would be ROE accretive (by 1.6ppts) because of higher earnings (interest cost-savings), and smaller equity base because of lower goodwill," AllianceDBS said.

Yesterday, RHB Capital group managing director Kellee Kam said the restructuring would see the group move towards a bank holding company structure in line with major regional banking groups across Association of Southeast Asian Nations.

Kam said the move would also give RHB Capital better capital and tax efficiency for profit growth.